What Does Coinsurance for Health Coverage Mean?

When choosing a health insurance plan, several variables should go into your decision. For example, the deductible and the co-pay are important things to consider with each insurance plan. One of the factors that many people overlook in their decision is the amount of coinsurance. Coinsurance is part of the amount of money that you will have to pay out of your own pocket for health services.

Function

• The purpose of coinsurance is to share the burden of the medical bills with your insurance company. With a larger amount of coinsurance, you can expect your premiums to be smaller than you would if your coinsurance was small. The coinsurance will typically be a percentage of the total cost. For example, if you incur any medical costs, your coinsurance percentage might be 20 percent and the insurance company will pay the other 80 percent.

Other Costs

• With health insurance, you have a few different types of out-of-pocket costs. The coinsurance is different from the deductible and co-pays that you have to pay with this type of plan. The deductible is the amount of money that you have to pay before your insurance starts to make any payments. If you visit the doctor, you may also have a separate co-pay. For example, your co-pay might be $30 for an office visit.

Caps

• Even though you do have to pay a percentage of your total medical costs with coinsurance, most insurance plans have a cap on them. This means that you will have to pay this percentage only up to a certain amount. Once you reach this limit, the insurance company will generally pay the rest of the costs involved with your medical services. This puts a dollar cap on your liability and makes it possible for you to afford very expensive medical procedures.

Types

• Each health insurance plan has a different level of coinsurance associated with it. The most common coinsurance arrangement is an 80/20 split with the insurance company paying 80 percent of expenses while you pay the other 20 percent. Another common arrangement is a 90/10 split. Some insurance plans also offer a 70/30 split. The more coinsurance you are willing to pay, the lower you can make your annual health insurance premiums.

Considerations

• When shopping for a health insurance plan, you will definitely have a lot of options to choose from. During this process, it is important for you to ensure that you compare apples to apples. If you look at one plan that has a very high coinsurance percentage against a plan that has a low coinsurance percentage, you will not be getting an accurate comparison.